South Korea Continues to Combat Against Tech Giants Google & Apple

Submitted by Christina Alonso to the Global Business course at the University of Seoul-??????? on June 7, 2022.

NHN集团 continues to combat 谷歌 as the dominant search engine, South Korea’s Telecommunications Business Act is enforced, new research reveals Google has continued to make privacy an issue, and 三星电子 reports the largest growth in the recent quarter all while helping 苹果 with their newest processor.

Introduction

Google is one of the most known companies worldwide, dominating 92.17% of the search engine market as of February 2022 (Tsyulia, 2022). It has grown so popular that the phrase “Google it” is its own verb. With Google’s innovative technology, they have even created their own operating system called Android. Android is used by the Korean company Samsung Electronics to implement into their Samsung smartphones. Samsung Electronics has also previously provided chips to their biggest competitor, Apple. Apple currently dominates 47% of the smartphone market, with Samsung only at 28%, but Samsung continues to make growth.

Korea’s #1 Search Engine: Naver

Following Google, there are other worldwide competitors like Bing, Yahoo!, Baidu, YANDEX, and DuckDuckGo (Oberlo, 2022). But what about in South Korea specifically? In 1991, Naver was founded by ex-Samsung employees and was launched in 2000, which was the same year Google Korea was launched (Y, 2021). Flash forward to a few years later, Naver is Google’s #1 competitor and dominates South Korea's search engine market with 56% of the market share (Tsyulia, 2022). Google and Apple continue to stir tension within their competitor’s territories, their user’s privacy, and the South Korean law.

Telecommunications Business Act

In 2021, South Korea passed the Telecommunications Business Act, also known as the “anti-Google bill”, which was pushed by President Moon Jae-in’s Democratic Party and endorsed by the National Assembly with 180 votes against app store duopoly Google and Apple, who created their app payment system to be mandatory (Su-hyun, 2021). Their original strategy allowed a bulk of their earnings to come from the app store, earning up to 30% commission, which this bill will demolish and put a dent in their earnings. The Play Store alone contributed to 20% of Alphabet’s (Google’s parent company) income in 2019. This was alleged to be market dominance abuse, which resulted in South Korea’s decision for the new regulation. The Telecommunications Business Act will prevent Google and Apple from forcing local app developers to use their payment systems for in-app purchases. The bill intended to prevent forced exclusivity because of the in-app payment systems and to set limitations on store operators who delayed or deleted apps for illogical reasons.

During the release of South Korea’s move, Google and Apple were still in the process of facing their lawsuit with Epic Games in the United Kingdom. They were being sued for similar reasons and violated the UK’s competition laws. Epic Games believed that because Google Android and iOS have power over app stores, they have abused their power by preventing competition from alternative app stores. Epic Games also wants to stop developers from using their own payment-processing services for purchases and charging unfair prices for the distribution of apps. Specifically, Apple and Google typically took a 30% cut from their app stores (Fox, 2021). Tim Sweeny, CEO of Epic Games, stated that the Telecommunications Business Act was a “major milestone in the 45-year history of personal computing” (Jung-a, 2021).

Flash forward to February 2022, South Korea was still struggling to work with Google and Apple to comply with the new bill (Warwick, 2022). The Korea Communications Commission (KCC) stated that Apple’s compliance that was submitted in January 2022 lacked detail, and Google’s undetailed plan was to reduce their service charge to developers (Lee, 2022). They felt that their compliance was not enough, and South Korea continued the process of creating specific guidelines for them to comply, to finally prevent Apple and Google from forcing their in-app payment system (Owen, 2022).?

On March 8, 2022, the rules within the new law were finalized and ready to be officially implemented on March 15, 2022. The rules implemented are meant to combat "the act of forcing a specific payment method to a provider of mobile content,” stated an unnamed KCC official. KCC Chairman Han Sang-hyuk said, "In order to prevent indirect regulatory avoidance, prohibited acts, types, and standards have been established as tightly-knit as possible within the scope delegated by the law". Although Apple and Google seemed to be unprepared for the official implementation of the rules, they were given short notice regardless. They received an abundant amount of time and patience to work with South Korea's lawmakers, who felt that they were not complying as fast. This resulted in being given a week after the March 8th announcement to prepare. Any failure to comply after March 15 could cost store operations fines as high as 2% of their annual average revenue (Owen, 2022).

Google’s Crossing Boundaries with Data Collection

Many people consider Google a search engine company, however, it is more like an advertising company. They use their platform and company to collect data, which helps them better target their ads. Although data collection may not seem like a significant deal, new research shows that Google has been collecting data from phone calls and text messages, along with app activity, and of course, your Google searches. With Google tracking activity and searches, they can better target users as consumers through their advertising. This is common knowledge, but the collection of really personal data was not brought to light until recently.?

Google licenses Android for free to big smartphone companies like Samsung, which Google is currently in a 10-year contract with. It’s free because Google is able to use this information to collect data to better market to their audience, which is similar to what other apps and websites do when new users are accessing their platforms. Because Samsung has a heavy position in the Korean smartphone market, South Korea sees a risk in privacy due to the big data collection made by Google.?

Google has been tracking phone calls and messages, and their reasoning is to prevent spam calls and send data analytics to improve user experience and software features. On the downside, Google has access to users’ Google Android ID, which is oftentimes connected to a real identity, which makes collecting data no longer anonymous. The trade-off for the “free” license to companies like Samsung is their user’s privacy (Smith, 2022). There has been tension between Google and Korean tech applications, and South Korea continues to adjust and protect Korea from Google’s dominance and data collection.

Samsung’s Recent Growth Against Google and Apple

Samsung Electronics used to provide Apple with chips from their first iPhone in 2007 up until 2015. Little did Samsung know that Apple would turn out to be their biggest smartphone competitor. Apple has recently been working on creating their own chips like their M1 flip-chip ball grid array (FC-BGA) which was placed in their 2020 products, including the 4th generation MacBook Air, 5th generation Mac mini, 13-inch 5th generation MacBook Pro, and 5th generation iPad Pro. Although Apple discontinued their chip business with Samsung in 2015, they recently released in April 2022 that they will be producing an FC-BGA for Apple's M2 PC processors this year (www.etnews.com, 2022).

Even though Apple has been the tough competitor with their innovative technology to create many software updates, Samsung no longer lags so much further behind. With the release of the Samsung Galaxy S22 series of smartphones on February 9, 2022, they have confirmed they will be able to provide more Android updates. Samsung stated in a press release that their goal is to deliver the “most up-to-date and more secure mobile experience possible for users by offering up to four generations of One UI and Android OS upgrades on select Galaxy devices”. Their new series will come with four years of Android updates, whereas Google Pixel only comes with three years of updates. Samsung beats Google’s Pixel series, however, Apple still provides more with 6 years' worth of updates (TIMESOFINDIA.COM, 2022).

During the first quarter of 2022, Samsung reclaimed their top spot in the smartphone market in South Korea. They increased from 19% to 23% from the previous quarter. There were a total of 74 million units of smartphones shipped between January and March. Apple currently sits at 18% market share in South Korea, only having shipped 59 million units (???, 2022). Samsung had a 22% shipment share and 27% revenue share due to the rise in sales in their 5G handsets. They were also named as the best 5G smartphone selling company again, continuing from the previous quarter (SHARMA, 2022).??

Samsung has also shown exponential growth in the United States. Samsung currently sits in second place at 28% market share with Apple at 47%. Apple’s share decreased by 7% since the first quarter of 2021, whereas Samsung increased by 3%. The statistics from the recent quarter reveal Samsung has had the biggest share growth in a while, specifically since their progress back in the first quarter of 2014, narrowing the gap between their biggest competitor Apple. The increase in Samsung’s market share was due to the strong demand for the flagship Galaxy S22 series that was released on February 25th in the United States and South Korea (Pulse, 2022).

Summary

In summary, South Korea still has a long and tough battle against the duopoly of Google and Apple. They are up against two of the biggest tech giants of the world, but their actions have been taken notice by other countries who have also chosen to take action and speak up. Even though South Korea struggles to prevent these two tech giants from their technology abuse, they have been able to grow Naver and Samsung to over time outweigh the damage they have caused and make these South Korean companies healthy competitors.

Sources

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